Higher home prices and rising interest rates have caused more home buyers to increase their debt loads, according to recent studies by CoreLogic and Arch Mortgage Insurance. While this isn’t surprising news, the trend is causing concern among industry analysts.
As of the first quarter of 2018, the average mortgage payment in the U.S. increased by 5% nationally, compared to the same period a year ago. By the end of the year, mortgage payments are projected to rise by 10% to 15%, based on home price trends and mortgage rate forecasts. (Please note that this estimate applies only to new mortgages generated on home purchases made during 2018.)
About a third of home buyers now have debt-to-income ratios of 45%, meaning that nearly half of their gross monthly income is swallowed up by their mortgage payment and other consumer debts. These buyers will probably see the balance of of their monthly income taken up by the basic necessities of life, including utility bills, home maintenance and repairs, groceries, transportation costs and so on. In turn, it may be difficult for them to save money for other purposes.
It’s no secret that home affordability is a problem in many ares of the country. Chicago is among the most affordable cities for home buyers in the U.S., but that doesn’t exclude us from the trend of rising home prices and higher interest rates.
Home buyers need to think long-term before maxing out their debt-to-income ratios! Taking on the highest mortgage payment you can possibly qualify for may not be the best move. You can boost your home buying power by paying off other debts, or by saving more money and making a larger down payment. The right strategy for you depends on your personal situation, and the depth of your financial resources!
StartingPoint Realty – expert guidance for first-time home buyers!
We offer the most complete home buying information in the area! If you’d like an in-depth look at Chicago neighborhoods, homes, public transportation and municipal services, make an appointment to meet us at our Chicago Resource Center!
Always feel welcome to contact us for help with your Chicago home buying questions!
Ryan Gable Broker/CEO Starting Point Realty Phone: 847.348.1154 Email: RyanGable@startingpointrealty.com https://startingpointrealty.com/ Become a StartingPoint Realty Facebook Fan Follow StartingPoint Realty on Twitter